10 Forex Money Management Tips

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10 Tips for Forex Money Management
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Index

1. Forex Money Management
2. Quantify Your Risk Capital
3. Avoid Trading Too Aggressively
4. Be Realistic
5. Admit When You Are Wrong
6. Prepare for the Worst
7. Visualize Exit Points Before Entering a Position
8. Use Some Form of Stop
9. Don't Trade on Tilt
10. Respect Understand Leverage
11. Think Long Term

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Forex Money Management

• To succeed at trading, you need a complete
  trading plan.
• A trading plan will tell you when to enter when
  to exit, which currency pair to trade, how to
  manage your money.
• So money management is vitally important, but it
  is only part of the complete picture.
• Below is a list of money management tips to use
  while Forex trading.

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1. Quantify Your Risk Capital

• Many important aspects of money management
  proceed from this key value.
• For example, the size of the overall risk capital
  will be a factor determining the upper limit of
  position size.
• You might consider it prudent to risk no more
  than 2 of the overall risk capital in any one
  trade.

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2. Avoid Trading Too Aggressively

• Trading too aggressively is maybe the biggest
  mistake new traders make.
• If the small sequence of losses would be enough
  to eradicate most of the risk capital, it
  suggests each trade has too much risk.

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• A way to aim for a correct level of risk is to
  adjust the position size to reflect the
  volatility of pair you are trading.
• But remember that a more volatile currency
  demands a smaller position than the less volatile
  pair.

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3. Be Realistic

• One of the reasons that Beginners are overly
  aggressive is because their expectations are not
  realistic.
• They think that aggressive trading helps them to
  make a return on their investment more quickly.

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• However, the best traders make steady returns.
• Setting realistic goals and maintain a
  conservative approach is the right way to start
  the trading.

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4. Admit When You Are Wrong

• The golden rule of trading is to run profits and
  cut your losses.
• It is essential to exit quickly when there's
  clear evidence that you have made a poor trade.
• It's a natural human tendency to try and turn a
  bad situation around, but it is a mistake in
  Forex trading.

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5. Prepare for the Worst

• We can't know the future of a market, but we have
  a lot of evidence of the past.
• What has happened before may not be repeated, but
  it does show what the possible is.
• Therefore, it is essential to look at the history
  of the currency pair you are trading.

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• Think about what thing you would need to take to
  protect yourself if a bad scenario were to occur
  again.
• Do not underestimate the chances of price shocks
  happening you should have a plan for such a
  scenario.

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6. Visualize Exit Points Before Entering a
Position

• Think about what levels you are aiming for on the
  upside and what loss is sensible to the withstand
  on the downside.
• Doing so help you to maintain your discipline in
  the heat of the trade.
• It will also encourage you to think regarding
  risk versus reward.

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7. Use Some Form of Stop

• Stops help to cut losses and are very useful when
  you are not able to control the market.
• At the very least, you should use a mental stop
  if you don't want to use a real order in the
  market.
• Price alerts are also very useful.

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8. Don't Trade on Tilt

• You may suffer a bad loss or burn through the
  substantial portion of your risk capital.
• There is a temptation after the big loss to try
  and get your investment back with the next trade.
• But here's a problem. Increasing your risk when
  the risk capital has been stressed, is the worst
  time to do it.

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• Instead, consider decreasing your trading size in
  a losing streak or taking a break until you can
  identify the high-probability trade.
• Always stay on an even keel, both emotionally and
  regarding the position sizes.

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9. Respect Understand Leverage

• Leverage offers the opportunity to magnify
  profits made from risk capital you have
  available, but it also increases the potential
  for risk.
• It is a useful tool, but it is very important to
  understand the size of overall exposure.

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10. Think Long Term

• It stands to reason that the success or failure
  of the trading system will be determined by its
  performance in the long term.
• So be careful of apportioning too much importance
  to the success or failure of a current trade.
• Do not bend or ignore the rules of the system to
  make your current trade work.

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Thank You